SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
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14a-6(e)(2))
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/ / Soliciting Material Pursuant to Section 240.14a-12
Hathaway Corporation
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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HATHAWAY CORPORATION
8228 Park Meadows Drive
Littleton, Colorado 80124
U.S.A.
Telephone: 303-799-8200
Facsimile: 303-799-8880
[LOGO]
September 21, 2001
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders of
Hathaway Corporation to be held on Thursday, October 25, 2001, commencing at
2:00 p.m. (Mountain Time) at the Lone Tree Country Club, 9808 Sunningdale Blvd.,
Littleton, Colorado. The Board of Directors and management look forward to
personally greeting those shareholders able to attend the meeting.
At the Annual Meeting you will be asked to consider and vote on the
election of five directors to serve until the next annual meeting.
Your Board of Directors unanimously recommends a vote FOR the election of
directors nominated by the Board. Regardless of the number of shares you own and
whether or not you plan to attend, it is important that your shares are
represented and voted at the Annual Meeting. Accordingly, you are requested to
sign, date and mail the enclosed proxy at your earliest convenience.
On behalf of the Board of Directors, thank you for your cooperation and
support.
Sincerely,
Richard D. Smith
President and Chief Executive Officer
1
HATHAWAY CORPORATION
8228 PARK MEADOWS DRIVE
LITTLETON, COLORADO 80124
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held October 25, 2001
To the shareholders of
Hathaway Corporation:
You are hereby notified that the annual meeting of shareholders (the
"Annual Meeting") of Hathaway Corporation, a Colorado corporation (the
"Company"), will be held on October 25, 2001 at 2:00 p.m. (Mountain Time) at the
Lone Tree Country Club, 9808 Sunningdale Blvd., Littleton, Colorado, for the
following purposes:
1. to elect five persons to the Company's Board of Directors
to serve until the next annual meeting of shareholders or
until their successors are duly elected and have qualified;
2. to consider and act upon such other business as may
properly be presented for action at the Annual Meeting or
any adjournment thereof.
The Board of Directors has fixed the close of business on September 6,
2001 as the record date (the "Record Date") for the Annual Meeting. Only
shareholders of record at the close of business on the Record Date will be
entitled to notice of and to vote at the Annual Meeting. The Company's transfer
books will not be closed.
The Board of Directors of the Company extends a cordial invitation to all
shareholders to attend the Annual Meeting, as it is important that your shares
be represented at the meeting. Even if you plan to attend the Annual Meeting,
you are strongly encouraged to mark, date, sign and mail the enclosed proxy in
the return envelope provided as promptly as possible.
You may revoke your proxy by following the procedures set forth in the
accompanying proxy statement. If you are unable to attend, your written proxy
will assure that your vote is counted.
By Order of the Board of Directors
/s/ Susan M. Chiarmonte
Susan M. Chiarmonte
SECRETARY
Denver, Colorado
September 21, 2001
HATHAWAY CORPORATION
8228 PARK MEADOWS DRIVE
LITTLETON, COLORADO 80124
PROXY STATEMENT
This proxy statement and the accompanying proxy card are being furnished
to the holders of common stock, no par value ("Common Stock"), of Hathaway
Corporation, a Colorado corporation (the "Company"), in connection with the
solicitation of proxies by the Board of Directors of the Company to be voted at
the annual meeting of shareholders (the "Annual Meeting") to be held on October
25, 2001 at 2:00 p.m. (Mountain Time) at the Lone Tree Country Club, 9808
Sunningdale Blvd., Littleton, Colorado. The Annual Meeting is called for the
purposes set forth in the accompanying notice of annual meeting of shareholders.
This proxy statement and the accompanying proxy card were first mailed to
shareholders on or about September 21, 2001.
QUORUM AND VOTING RIGHTS
The presence, in person or by proxy, of the holders of a majority of the
votes entitled to be cast on the matter presented is necessary to constitute a
quorum at the Annual Meeting. Broker non-votes are shares held in street name
for which the broker indicates that instructions have not been received from the
beneficial owners or other persons entitled to vote, and the broker does not
have discretionary voting authority. Broker non-votes and abstentions will be
counted as shares present in determining whether a quorum is present. The
affirmative vote of the holders of two-thirds of the shares of Common Stock
entitled to vote at the Annual Meeting is required for the election of directors
(Item 1). Since election of directors requires the approving vote to be measured
against all shares of Common Stock entitled to vote, withholding authority
(including broker non-votes) from that vote is the equivalent of a vote against
election of nominated directors. The record date for determination of
shareholders entitled to notice of, and to vote at, the Annual Meeting is the
close of business on September 6, 2001 (the Record Date). As of the close of
business on the Record Date, there were 4,630,587 shares of Common Stock
outstanding, each of which is entitled to one vote at the Annual Meeting.
All shares of Common Stock represented by properly executed proxies will,
unless such proxies have been revoked previously, be voted in accordance with
the instructions indicated in such proxies. If no such instructions are
indicated, such shares will be voted FOR the election of the five nominees for
director (Item 1), and in the discretion of the proxy holders on any other
matter that may properly come before the Annual Meeting (Item 2). Any holder of
Common Stock has the unconditional right to revoke his or her proxy at any time
prior to the voting thereof at the Annual Meeting by filing with the Secretary
of the Company written revocation of his or her proxy prior to the voting
thereof, giving a duly executed proxy bearing a later date, or voting in person
at the Annual Meeting. If a shareholder's shares are held by a nominee and the
shareholder seeks to vote shares in person at the Annual Meeting, the
shareholder must bring to the Annual Meeting a written statement from the
nominee confirming the shareholder's beneficial ownership of a stated number of
shares and that such shares have not been voted by the nominee. Attendance by a
shareholder at the Annual Meeting will not in itself revoke his or her proxy.
Solicitation of proxies for use at the Annual Meeting may be made in
person or by mail, telephone or telegram, by directors, officers and regular
employees of the Company. Such persons will receive no special compensation for
any solicitation activities. The Company will request banking institutions,
brokerage firms, custodians, trustees, nominees and fiduciaries to forward
solicitation materials to the beneficial owners of Common Stock held of record
by such entities, and the Company will, upon the request of such record holders,
reimburse reasonable forwarding expenses. The costs of preparing, printing,
assembling and mailing the proxy statement, proxy card and all materials used in
the solicitation of proxies to shareholders of the Company, and all clerical and
other expenses of such solicitation, will be borne by the Company.
ITEM 1: ELECTION OF DIRECTORS
The Company's articles of incorporation and bylaws provide for a board
consisting of not less than three and not more than six persons, as such number
is determined by the Board of Directors. The board has determined that the board
will consist of five directors, all of whom will be elected annually to serve
until the next annual meeting of shareholders and until their successors are
elected and qualified, or until the director resigns or is otherwise removed.
All incumbent directors have been nominated to succeed themselves as
directors. The affirmative vote of the holders of two-thirds of the shares of
Common Stock entitled to vote at the Annual Meeting is required for the election
of directors. If the number of votes required for the election of directors is
not received, directors will continue in office until the next annual meeting or
until resignation or removal. Unless authority is withheld, it is intended that
the shares represented by proxy at the Annual Meeting will be voted in favor of
the five nominees named below. All nominees have agreed to serve if elected.
If any nominee becomes unable or unwilling to serve at the time of the
Annual Meeting, the shares of Common Stock represented by proxy at the Annual
Meeting will be voted for the election of such other person as the Board of
Directors of the Company may recommend.
MANAGEMENT RECOMMENDS A VOTE "FOR" EACH NOMINEE NAMED.
NOMINEES
The following information concerning the nominees for election as
directors has been provided by the respective nominee:
NAME AGE POSITION WITH THE COMPANY
------------------- ----- ---------------------------------------------------
Eugene E. Prince 69 Chairman of the Board of Directors
Richard D. Smith 54 President, Chief Executive Officer, Chief Financial
Officer and Director
Delwin D. Hock 66 Director
Graydon D. Hubbard 67 Director
George J. Pilmanis 63 Director
Mr. Prince has served as a director of the Company since October 1975 and
as Chairman of the Board of Directors since January 1981. He served as President
of the Company from October 1975 and as Chief Executive Officer from September
1976 until his resignation from those offices on August 13, 1998. He retired
from his employment with the Company effective August 31, 1998 but served as a
paid consultant through November 1999. Pursuant to his consulting agreement, as
long as Mr. Prince owns at least 10% of the issued shares of the Company, the
Board of Directors shall nominate him for election to the Board of Directors. If
he is elected, the Board of Directors will request that he be nominated for
Chairman of the Board of Directors.
Mr. Smith was appointed President and Chief Executive Officer of the
Company on August 13, 1998. He was Executive Vice President from August 1993
until August 1998. Mr. Smith served as Vice-President of Finance from June 1983
to August 1993. He has served as Chief Financial Officer since June 1983. From
June 1983 until October 1999, Mr. Smith was the Company's Treasurer and from
January 1990 until October 1996, he was the Company's Secretary. He has served
as a director since August 1996. Pursuant to Mr. Smith's employment agreement,
as long as he is President and Chief Executive Officer of the Company and is
willing to serve, the Board of Directors will nominate him for election to the
Board.
Mr. Hock has served as a director of the Company since February 1997.
He retired from his position as Chief Executive Officer of Public Service
Company of Colorado, a gas and electric utility, in January 1996 and as
Chairman of the Board of Directors in July 1997. From September 1962 to
January 1996, Mr. Hock held various management positions at Public Service
Company. He serves as a director of J.D. Edwards & Company, Internet
Commerce & Communications, Inc. and on six separate entities overseeing the
operation of funds in the American Century Investors fund complex.
2
Mr. Hubbard has served as a director of the Company since 1991. He is
a retired certified public accountant and was a partner of Arthur Andersen
LLP, the Company's independent public accountants, in its Denver office for
more than five years prior to his retirement in November 1989. Mr. Hubbard
is also an author.
Mr. Pilmanis has served as a director of the Company since 1993. For
more than five years he has been chairman and president of Balriga
International Corp., a privately held company concerned with business
development in the Far East and Eastern Europe.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors held four regular meetings and one special meeting
during the fiscal year ended June 30, 2001. Each director attended or
participated in 75% or more of the total number of meetings of the board held
during the period for which he has been a director and all committees of the
board on which such director served.
The Board of Directors has established an Audit Committee and a
Compensation Committee, each of which is composed of directors who are not
employees of the Company. No nominating committee has been established. The
Board of Directors selects the Company's nominees for election to the board. The
board will consider nominees recommended by shareholders who meet the
requirements for shareholder proposals set forth on the last page of the Proxy
Statement.
The principal responsibilities of the Audit Committee are to make
recommendations to the Board of Directors concerning the selection of the firm
of independent auditors and the scope of auditing and accounting matters and to
consult with the Company's independent auditors regarding auditing and
accounting matters. The members of the Audit Committee during the fiscal year
ended June 30, 2001 were Messrs. Hock (Chairman), Hubbard and Pilmanis. The
members of the Audit Committee are independent as defined in Rule 4200(a)(14) of
the National Association of Securities Dealers Listing Standards. The Audit
Committee held two meetings during the fiscal year ended June 30, 2001.
Representatives from the Company's independent auditors make a presentation
annually to the Board of Directors after the completion of the fiscal year end
audit. At that time, the entire Board has an opportunity to discuss issues with
or ask questions of the auditors.
The principal responsibility of the Compensation Committee is to make
recommendations to the Board of Directors concerning the compensation of the
Company's management employees including its executive officer. The members of
the Compensation Committee are Messrs. Pilmanis (Chairman) and Hock. The
Compensation Committee held one meeting during the fiscal year ended June 30,
2001.
EXECUTIVE OFFICER
Set forth below is information regarding the Executive Officer of the
Company.
NAME AGE POSITION WITH THE COMPANY
------------------- ----- ---------------------------------------------------
Richard D. Smith 54 President, Chief Executive Officer, Chief Financial
Officer and Director
Information with respect to employment experience is provided above.
INDEBTEDNESS OF MANAGEMENT
The Company encourages officers and directors to own shares in the Company
and has lent money to officers and directors for the purpose of purchasing
shares. During fiscal year 2001, Richard D. Smith, Director, President, CEO and
CFO had an outstanding loan in the principal amount of $133,652 which he
obtained for the purpose of exercising stock options. Interest is payable at the
applicable treasury rate which was 6.5% per annum during the first six months
and 5.80 % per annum during the last six months. The largest aggregate amount of
indebtedness, including accrued interest
3
outstanding during fiscal year 2001 was $141,991. The amount outstanding,
including accrued interest, as of September 6, 2001, was $138,565. Mr. Smith
paid accrued interest of $8,339 on December 31, 2000. The difference between
interest paid by Mr. Smith and interest at a fair market value rate is
considered compensation to Mr. Smith.
The loan described above was made pursuant to an Officer and Director Loan
Plan that was approved by shareholders on October 26, 1989. The loan was
originally due on October 26, 1998 and was then extended through October 31,
2001. The Board of Directors proposes to authorize an extension of the due date
to October 31, 2002 with all other terms of the loan to remain the same. The
authorization will be made after October 15, 2001.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table and notes set forth, as of the Record Date (except for
Mr. Albert for whom information is provided as of March 16, 2000), the
beneficial ownership, as defined by the regulations of the Securities and
Exchange Commission, of Common Stock by each person known to the Company to be
the beneficial owner of more than 5% of the outstanding shares of Common Stock
(based on the records of the Company's stock transfer agent or a representation
by the beneficial owner), each director and nominee, the executive officer and
all persons who serve as executive officers and directors of the Company, as a
group.
AMOUNT AND NATURE OF
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP(1) PERCENT OF CLASS (2)
------------------------------------ ----------------------- --------------------
Eugene E. Prince.................... 922,050(3) 19.6%
7560 Panorama Drive
Boulder, Colorado 80303
Richard D. Smith.................... 442,172(4) 9.6%
8228 Park Meadows Drive
Littleton, Colorado 80124
Ira Albert.......................... 274,300(5) 5.9%
1304 SW 160th Avenue, Suite 209
Ft. Lauderdale, FL 33326
Delwin D. Hock...................... 31,500(6) --
Graydon D. Hubbard................... 21,000(7) --
George J. Pilmanis.................. 8,000(8) --
Directors and executive
officers of the
Company as a group (5 persons)...... 1,424,722(9) 28.6%
------------------
(1) All beneficial ownership is sole and direct unless otherwise noted.
(2) No percent of class is shown for holdings of less than 1%.
(3) Includes 79,500 shares of Common Stock which Mr. Prince has the right
to acquire within 60 days of the Record Date upon exercise of options.
Includes 88,800 shares of Common Stock held by the Prince Children's
Trusts, of which Mr. Prince's wife is trustee and as to which Mr. Prince
disclaims beneficial ownership.
(4) Includes 340,000 shares of Common Stock which Mr. Smith has the right to
acquire within 60 days of the Record Date upon exercise of outstanding
options and 121,784 shares of Common Stock held by the Company's Employee
Stock Ownership Plan ("ESOP") as of the Record Date, as to which Mr. Smith
could be deemed to have shared investment power as a trustee of the ESOP,
which includes 4,150 shares of Common Stock credited to the ESOP account
of Mr. Smith. Includes 12,583 shares of Common Stock held by Smith Family
Trust, of which Mr. Smith is trustee.
(5) Based on Schedule 13D filed by Mr. Albert with the Securities and Exchange
Commission on or about March 16,
4
2000; includes 117,600 shares of Common Stock, held by Albert Investment
Associates, L.P., as to which Mr. Albert has sole voting and investment
power; includes 133,200 shares of Common Stock held by various accounts as
to which Mr. Albert has sole investment power.
(6) Includes 25,500 shares of Common Stock which Mr. Hock has the right to
acquire within 60 days of the Record Date upon exercise of outstanding
options.
(7) Consists of 21,000 shares of Common Stock which Mr. Hubbard has the right
to acquire within 60 days of the Record Date upon exercise of outstanding
options.
(8) Consists of 8,000 shares of Common Stock which Mr. Pilmanis has the right
to acquire within 60 days of the Record Date upon exercise of outstanding
options.
(9) Includes 474,000 shares of Common Stock which directors and executive
officers have the right to acquire within 60 days of the Record Date upon
exercise of outstanding options and 121,784 shares of Common Stock held by
the ESOP as to which Mr. Smith has shared investment power as trustee of
the ESOP, which includes 4,150 shares of Common Stock held by the ESOP for
the account of Mr. Smith.
EXECUTIVE COMPENSATION
COMPENSATION OF DIRECTORS
The Board of Directors holds four regular full day meetings each year.
Through August 2001, non-employee directors received $3,300 per full day
meetings of the board, $1,000 for one-half day meetings, $450 per hour for
telephone meetings, $1,000 per committee meeting and $1,000 per half day for
official travel to locations outside the Denver area. After August 2001,
non-employee directors are compensated at the rate of $3,600 per full day
meeting of the board, $1,100 for each additional one-half day meeting, $500 per
hour for a telephone meeting, $1,100 per committee meeting, and $1,100 per half
day for official travel to locations outside the Denver area.
Board members were compensated at the rate of $250 per hour ($275 per hour
after August 2001) for the time spent consulting with the Company at the request
of the Board of Directors or the President, preparing minutes of the Audit or
Compensation Committees and on special assignment of such committees. During the
2001 fiscal year, Mr. Hock received $500 and Mr. Pilmanis received $250 for
preparation of Committee Minutes.
The Company entered into a Consulting Agreement with Mr. Prince effective
after his retirement from employment on August 31, 1998. Under the Agreement,
Mr. Prince will provide consulting services to the Company primarily on matters
involving the Company's motion control products, but also on other matters as
requested by the President. He will be compensated at the rate of $250 per hour.
During fiscal 2001, Mr. Prince was not paid for providing any consulting
services.
During fiscal 2001, each non-employee director was granted an option to
purchase 15,000 shares of the Company's Common Stock at the quoted market price
on the date of grant ($4.83) exercisable over three years in cumulative equal
annual segments, starting one year from the date of grant. The options have a
seven year term.
INDEMNIFICATION
The Company indemnifies its directors and officers to the fullest extent
permitted by law so they will serve free from undue concern that they will not
be indemnified. Indemnification is required under the Company's Bylaws. The
Company has also signed agreements with each of its directors contractually
obligating the Company to provide the indemnification to them.
SUMMARY OF CASH AND OTHER COMPENSATION OF EXECUTIVE OFFICER
The following table shows the compensation earned by the Chief Executive
Officer (the "Named Executive Officer") of the Company during fiscal year 2001.
5
SUMMARY COMPENSATION TABLE
LONG - TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
------------------------ --------------
SECURITIES
NAME & UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS COMPENSATION
------------------------ ------ ---------- ------------- -------------- ----------------
Richard D. Smith 2001 $ 223,125 $ 180,000 90,000 $ 17,245 (1)
President and CEO 2000 $ 206,250 $ 42,000 69,000 $ 17,547
1999 $ 176,481 $ 0 100,000 $ 17,237
----------------------
(1) All other compensation for Mr. Smith during fiscal year 2001 consists of
Company contributions to defined contribution plans of $5,248, Company
paid life insurance premiums of $10,845, and interest on a loan to Mr.
Smith of $1,152 calculated as the difference between interest accrued and
the fair market rate at the time the interest rate was determined.
OPTION GRANTS IN LAST FISCAL YEAR
The following table provides a summary of all stock options granted during
fiscal year 2001 to the Named Executive Officer. It also shows a calculation of
the potential realizable value if the fair market value of the Company's shares
were to appreciate at either a 5% or 10% annual rate over the period of the
option term.
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF STOCK
PRICE APPRECIATION FOR
INDIVIDUAL GRANTS OPTION TERM
----------------------------------------------------------------------------- ------------------------
NUMBER OF PERCENT OF
SECURITIES TOTAL OPTIONS
UNDERLYING GRANTED TO EXERCISE OR
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION
NAME GRANTED (1) FISCAL YEAR ($/SH) (2) DATE 5%($) 10%($)
---- ----------- ------------- ------------ ------------ ----------- ----------
RICHARD D. SMITH 90,000 19.9 $4.83 10/26/2007 $176,967 $412,407
---------------
(1) The options granted have a seven year term and were immediately
exercisable. The grants permit the exercise of options in exchange for
shares of the Company's common stock as well as for cash. In connection
with a merger, sale of assets, share exchange, or change of control of the
Company, the Committee may allow surrender for cash, substitution or
cancellation.
(2) Exercise price was established at quoted market price for company shares
on the date of grant.
See discussion under COMPENSATION COMMITTEE REPORT regarding new options
granted to Mr. Smith subsequent to fiscal year 2001.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
The following table sets forth information regarding option exercises
during the 2001 fiscal year and unexercised stock options held as of the 2001
fiscal year end by the Named Executive Officer:
6
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY
SHARES VALUE OPTIONS AT FY - END (#) OPTIONS AT FY - END ($)(1)
ACQUIRED ON REALIZED -------------------------- --------------------------
NAME EXERCISE (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
------------ --------- ----------- ------------- ----------- -------------
RICHARD D. SMITH 0 $ 0 340,000 0 $ 401,438 $ 0
Fair market value of unexercised in-the-money options at fiscal year end is
based on the closing price of $3.75 of Common Stock on June 29, 2001.
LONG-TERM INCENTIVE PLANS - AWARDS IN LAST FISCAL YEAR
Long-term incentives are provided through stock option grants. See the
discussion under COMPENSATION COMMITTEE REPORT.
EMPLOYMENT AGREEMENTS WITH EXECUTIVE OFFICER
The Company has an Employment Agreement with Richard D. Smith which became
effective August 13, 1998 for an initial term of five years and continues
subsequently on a year-to-year basis unless the Company or the officer gives
termination notice at least 60 days prior to expiration of the initial or
subsequent terms.
BASE SALARY. The Agreement provides a base salary of not less than
$210,000 for Mr. Smith, and may be reviewed annually for increase on a merit
basis. Mr. Smith's salary was increased to $225,000 in August 2000 and to
$235,000 in August 2001.
ANNUAL INCENTIVE PLAN. Annual incentive bonuses are paid based on
achieving performance criteria established annually by the Board of Directors.
The performance criteria will recognize the overall financial performance of the
Company or the performance of its separate segments and the improvements made in
financial results. See discussion under COMPENSATION COMMITTEE REPORT.
LONG-TERM INCENTIVE PLAN PAYMENT. The Company utilizes stock options for
long-term incentives based on criteria described in the COMPENSATION COMMITTEE
REPORT.
OTHER PROVISIONS. Mr. Smith participates in other benefits and
perquisites as are generally provided by the Company to its employees. In
addition, the Company provides Mr. Smith with $500,000 of life insurance and
an automobile.
In the event of death, disability or termination by the Company prior to a
change in control, other than for cause, the Agreement with Mr. Smith provides
for limited continuation of salary and insurance benefits and for bonus
prorations or settlements.
CHANGE IN CONTROL ARRANGEMENTS
In 1989 the Company entered into an agreement with Mr. Smith pursuant to
which, upon termination by the Company (other than for cause as defined in the
Agreement) or by Mr. Smith for good reason (as defined in the Agreement) within
90 days prior to or 24 months following a change in control of the Company, he
is entitled to receive a severance payment equal to 2.5 times the sum of current
annual base salary plus the amount paid under the Annual Incentive Plan for the
preceding fiscal year, an allocation for incentive compensation for the current
year up to the date of termination and two year continuation of insurance
benefits. The agreement expires on December 31 of each year, however, it is
extended automatically on January 1 of each year for a term of two years, unless
notice of non-renewal is given by the Company not later than the September 30
immediately preceding renewal. The Company has similar agreements (providing
lower severance multiples) with other key executives. The change in control
agreements are applicable to a change in control of the Company or of the
subsidiary or division for which the executive is employed and require the key
executives to remain in the employ of the Company for a specified period in the
event of a potential change in control of the Company and provide employment
security to them in the face of current pressures to sell the
7
Company or in the event of take-over threats, so that they can devote full time
and attention to the Company's efforts free of concern about discharge in the
event of a change in control of the Company. These agreements are common at
other public companies. They are not excessive and are within industry
standards. In fiscal year 2001, the Board of Directors considered termination
of these agreements and determined that the reasons for executing change in
control agreements continue to be valid and concluded that notices of
non-renewal would not be in the best interests of shareholders.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During fiscal year 2001 the Compensation Committee was comprised of
Messrs. Pilmanis and Hock who are both non employees. See the caption EXECUTIVE
COMPENSATION - COMPENSATION OF DIRECTORS for information concerning compensation
paid to directors for attending and participating in board and committee
meetings and special assignments.
Notwithstanding anything to the contrary set forth in any of the Company's
previous filings under the Securities Act of 1933 or the Securities Exchange Act
of 1934 that might incorporate future filings, including this proxy statement,
in whole or in part, the following report and the performance graph on page 8
shall not be incorporated by reference into any such filings.
COMPENSATION COMMITTEE REPORT
Base salary for the chief executive officer is reviewed annually in
relation to corporate performance. As a result of achievements in the Company's
performance for fiscal year 2001, an increase of 4% was recommended for Mr.
Smith in August 2001.
In establishing target levels of achievement for Mr. Smith's Annual
Incentive Plan, the Committee reviews past Company operating results as well as
forecasts and plans for the ensuing year. For fiscal 2001 the target levels were
to achieve a 25% increase in corporate pretax net income over fiscal 2000.
Actual pretax income in 2001 increased nearly 80%. Based on the established
achievement levels, the committee recommended a bonus of $180,000 or 80% of
salary to Mr. Smith for fiscal 2001.
The Company's long-term incentive program is based on stock options. In making
its recommendations for grants of stock options, the Committee considers, among
other things, Mr. Smith's responsibilities and his efforts and performance in
relation to the business plan and forecast. It also considers development of the
Company's products, performance of the Company's products in the marketplace,
impact of the Company's products and product development on future prospects for
the Company, market performance of the Company's common stock, the relationship
between the benefits of stock options and improving shareholder value, the
current level of stock options held, the shares available for option and the
total shares under option grants. The committee also considers customary
business practices and long-term incentive plan benefits granted in comparison
to such benefits provided to other executives in similar positions. In August
2000, the committee considered granting options to Mr. Smith in recognition of
his performance for fiscal 2000, but recognized that no options were available
under the Company's option plans for grant to Mr. Smith at that time. In October
2000, the shareholders of the Company voted to approve a new stock option plan
and the board of directors then approved the grant to Mr. Smith of an
immediately exercisable option to purchase 90,000 shares of the Company's common
stock at the quoted market price on the date of grant ($4.83). In August 2001,
in recognition of his performance for fiscal 2001, Mr. Smith was granted an
immediately exercisable option to purchase an additional 90,000 shares of the
Company's Common Stock at the quoted market price on the date of grant ($3.20).
GEORGE J. PILMANIS
DELWIN D. HOCK
8
PERFORMANCE GRAPH
The following performance graph reflects change in the Company's
cumulative total stockholder return on common stock as compared with the
cumulative total return of the NASDAQ Stock Market Index and the NASDAQ
Measuring and Controlling Devices Index for the period of five fiscal years
ended June 30, 2001.
[GRAPH]
----------------------------- ------- ------- ------- ------- ------- ------
6/30/96 6/30/97 6/30/98 6/30/99 6/30/00 6/3/01
------- ------- ------- ------- ------- ------
HATHAWAY CORPORATION 100 81 58 48 139 97
NASDAQ (U.S.) 100 122 160 230 340 185
NASDAQ MEASURING DEVICES 100 127 101 144 334 219
----------------------------- ------- ------- ------- ------- ------- ------
SECTION 16 (a) BENEFICIAL OWNERSHIP
REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers and persons who own more than ten
percent of the Company's Common Stock to report their ownership and any changes
in that ownership to the Securities and Exchange Commission. The Company
believes that all Section 16(a) filing requirements applicable to its directors,
executive officers and greater than ten percent beneficial owners have been met
except that a Form 5 for one director was filed one day late.
INDEPENDENT PUBLIC ACCOUNTANT
Arthur Andersen LLP served as independent auditors of the Company for the
fiscal year ended June 30, 2001. A representative of Arthur Andersen LLP is
expected to be present at the Annual Meeting. He will have an opportunity to
make a statement if he so desires, and is expected to be available to respond to
appropriate questions.
The Audit Committee of the Board of Directors has not yet made a
recommendation to the Board of Directors with respect to the selection of
independent certified public accountants for fiscal 2002.
9
AUDIT COMMITTEE REPORT
The Audit Committee of the Board of Directors is composed of three
non-employee directors of the Company. All members are independent as defined in
the applicable New York Stock Exchange listing standards. The Committee held two
meetings during fiscal year 2001.
The Audit Committee is governed by a written charter adopted on May 3,
2000. The Audit Committee Charter was included as Exhibit "C" to the fiscal year
2000 Proxy Statement dated September 21, 2000.
In connection with the June 30, 2001 financial statements, the Audit
Committee has (1) reviewed and discussed the audited financial statements with
management; (2) discussed with the independent auditors the matters required to
be discussed by SAS 61; (3) received the written disclosures and the letter from
the independent accountants required by Independence Standards Board Standard
No. 1 (Independence Discussions with Audit Committees), and (4) discussed with
the independent accountant their independence.
Based on the review and discussions referred to in items (1) through (4)
of the above paragraph, the Audit Committee recommended to the Board of
Directors that the audited financial statements be included in the Company's
Annual Report on Form 10-K for the fiscal year ended June 30, 2001 for filing
with the Securities and Exchange Commission.
The Audit Committee has considered whether the provision of services
covered in Items 9(e)(2) and (e)(3) of schedule 14A under the Securities
Exchange Act of 1934 is compatible with maintaining the independence of Arthur
Andersen LLP. The Committee believes that the fees billed by Arthur Andersen LLP
for the services set forth below are compatible with Arthur Andersen LLP
maintaining its independence as the Company's principal accountant.
AUDIT FEES
The aggregate fees billed or expected to be billed by Arthur Andersen LLP
for professional services rendered for the audit of the Company's annual
financial statements for the fiscal year ended June 30, 2001 and for the reviews
of the financial statements included in the Company's Quarterly Reports on Forms
10-Q for the fiscal year 2001 are $73,020.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
There were no fees billed by Arthur Andersen LLP for the fiscal year 2001
for the professional services described in Paragraph (c)(4)(ii) of Rule 2-01 of
Regulation S-X.
ALL OTHER FEES
The aggregate fees billed or expected to be billed for professional
services rendered to the Company by Arthur Andersen LLP, other than for services
described above, for fiscal 2001 are $28,486.
DELWIN D. HOCK
GRAYDON D. HUBBARD
GEORGE J. PILMANIS
ITEM 2: OTHER MATTERS
The Board of Directors knows of no business to be presented for action at
the Annual Meeting except as described above. However, if other matters are
properly presented for a vote, the proxies will be voted upon such matters
(including matters incident to the conduct of the meeting) in accordance with
the judgment of the persons acting under the proxies.
10
ANNUAL REPORT
The Company's Annual Report for the year ended June 30, 2001 has been
mailed to shareholders with this Proxy statement.
SHAREHOLDER PROPOSALS FOR 2002 ANNUAL MEETING
Shareholders' proposals for the 2002 annual meeting of shareholders must
be submitted in writing to the Secretary of the Company at the address of the
Company set forth on the first page of this Proxy Statement no later than May
24, 2002 in order to be presented at the annual meeting or be considered for
inclusion in the Company's 2002 proxy statement and proxy card.
PLEASE SIGN, DATE AND MAIL PROMPTLY THE ENCLOSED PROXY.
HATHAWAY CORPORATION
September 21, 2001
11
HATHAWAY CORPORATION
8228 PARK MEADOWS DRIVE
LITTLETON, COLORADO 80124
The undersigned hereby appoints Eugene E. Prince and Richard D. Smith, or
either of them, proxies of the undersigned, each with the power of substitution,
and hereby authorizes them to vote, as designated below, all the shares of
common stock, no par value, of the undersigned at the annual meeting of
shareholders of Hathaway Corporation (the "Company") to be held on October 25,
2001, and at all adjournments thereof, with respect to the following:
Item 1. ELECTION OF DIRECTORS - Nominees of the Board:
E. E. Prince, R. D. Smith, D. D. Hock, G.D. Hubbard, and G. J. Pilmanis,
/ / FOR all nominees (except as / / WITHHOLD AUTHORITY
indicated to the contrary below). to vote for all nominees.
INSTRUCTIONS: To withhold authority to vote for any individual nominee,
print that nominee's name in the space provided below. IF AUTHORITY TO VOTE
FOR NOMINEES IS NOT EXPRESSLY WITHHELD, IT SHALL BE DEEMED GRANTED.
----------------------------------------------------------------------
Item 2. OTHER MATTERS - In the proxies discretion on such other business matters
as may properly come before the Annual Meeting.
THIS PROXY IS BEING SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE
COMPANY, AND MAY BE REVOKED PRIOR TO ITS EXERCISE. THIS PROXY, WHEN PROPERLY
EXECUTED, WILL BE VOTED AS DIRECTED ABOVE BY THE UNDERSIGNED SHAREHOLDER. IF NO
DIRECTION IS MADE, IT WILL BE VOTED FOR THE NOMINEES NAMED IN ITEM 1, AND IN THE
PROXIES' DISCRETION ON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE
ANNUAL MEETING.
----------------------------------------
By:
-------------------------------------
Your signature should appear exactly as
your name appears in the space at the
left. For joint accounts, all owners
should sign. When signing in a fiduciary
or representative capacity, please give
your full title as such.
Date: _______________________, 2001
PLEASE SIGN AND RETURN THIS PROXY IN THE ENCLOSED POSTAGE PAID ENVELOPE
AS PROMPTLY AS POSSIBLE.
